The Safe Investing Blog

Stock Market Outlook entering the Week of January 21st = Uptrend

• ADX Directional Indicators: Uptrend
• Price & Volume Signals: Uptrend
• Elliott Wave Analysis: N/A

ANALYSIS
The stock market outlook continues to show an uptrend in place, with the S&P500 ($SPX) gaining 1.2% last week.  The move pushed the index to a new, all time high, exceeding the market top in December 2021.

The index sits ~4.5% above the 50-day moving average, and ~9.5% above the 200-day moving average.

SPX Price & Volume Chart for the Week of Jan 21 2024

No change in the ADX and price/volume signals based to start the week.  The ADX did flip briefly midweek, but not by a large enough margin to trigger a signal.  On the price/volume side, distribution days remain elevated (5).  Watch for addition selling pressure, especially with the market at all time highs and above key support levels (i.e. 50-day).

For Elliott Wave, reader feedback late last year suggested Elliott Wave was too complex for use for an introductory example of trading signals and systems.  On the other side of that argument, Elliott Wave “purists” never liked the fact that these counts didn’t provide future targets or completed waves.

In either case, using Elliott Wave does require a lot of time…and that’s just to get “bad” at it.  So the stock market outlook will move on, and incorporate a different signal; one that is more data-based like the ADX.

COMMENTARY
December retail sales came in much higher than expected (+o.6% vs +0.3%), in an otherwise quiet week, data-wise.  Aside from all those Fed speeches, monthly option & futures expiration also influenced price and volume action last week; Wednesday was monthly expiration of volatility options (i.e. “vixperation”), and Friday’s monthly option expiration included long-term hedges (i.e. LEAP options).

This week, the market will react to initial estimates of 4th Quarter GDP (Thursday) and December PCE (Friday).

Best to Your Week!

P.S. If you find this research helpful, please tell a friend.
If you don’t, tell an enemy.

Sources: Bloomberg, CNBC, Federal Reserve Bank of St. Louis, Hedgeye, Stockcharts.com, U.S. Bureau of Economic Analysis, U.S. Bureau of Labor Statistics

Invest Safely, LLC is an independent investment research and online financial media company.  Use of Invest Safely, LLC and any other products available through invest-safely.com is subject to our Terms of Service and Privacy Policy.

Not a recommendation to buy or sell any security.

Stock Market Outlook entering the Week of January 14th = Uptrend

• ADX Directional Indicators: Uptrend
• Price & Volume Signals: Uptrend
• Elliott Wave Analysis: Downtrend

ANALYSIS
The stock market outlook shows an uptrend in place, with the S&P500 ($SPX) gaining 0.3% last week.  The index is ~4% above the 50-day moving average, and ~9% above the 200-day moving average.

SPX Price & Volume Chart for the Week of Jan 14 2024

There was not change in the ADX and price/volume signals based on last week’s market action.  For Elliott Wave, the RSI(5) recovered from last weekends oversold condition; it’s now just under overbought, but continues to show a negative/bearish divergence with price.  The MACD continues to show a bearish, albeit improving, trend.

COMMENTARY
December’s headline CPI was higher than expected, while core inflation was inline. Treasury rates rose in response on Thursday, as investors revisited their expectations for rate cuts this year.

• Headline CPI (y/y) = +3.4%
  • Previous = +3.1%
  • Expected = 3.2%
• Core CPI (y/y) =+3.9%
  • Previous = +4.0%
  • Expected = +3.8%

Earnings season also arrived, with big banks reporting mixed results.  Beating expectations, even lowered ones, was routine last year.  This quarter, 2024 projections will be the main story, as companies look to justify the rally in their stock prices since the end of October.

U.S. Markets are closed Monday, in observance of Martin Luther King Jr.’s birthday.  The short week won’t stop people from pontificating; there are a total of 6 Fed speeches lined up next week.  So expect a lot of “noise” and mixed messaging when it comes to interest rate policy.

Best to Your Week!

P.S. If you find this research helpful, please tell a friend.
If you don’t, tell an enemy.

Sources: Bloomberg, CNBC, Federal Reserve Bank of St. Louis, Hedgeye, Stockcharts.com, U.S. Bureau of Economic Analysis, U.S. Bureau of Labor Statistics

Invest Safely, LLC is an independent investment research and online financial media company.  Use of Invest Safely, LLC and any other products available through invest-safely.com is subject to our Terms of Service and Privacy Policy.

Not a recommendation to buy or sell any security.

Stock Market Outlook entering the Week of January 7th = Uptrend

• ADX Directional Indicators: Uptrend
• Price & Volume Signals: Uptrend
• Elliott Wave Analysis: Downtrend

ANALYSIS
Happy New Year!  The stock market outlook starts 2024 with an uptrend in place, as we look towards Q4 earnings season later this month.

After 9-straight weeks of gains, the S&P500 ($SPX) took a vacation to kick off the year, losing 1.5%.  The index now sits ~3.5% above the 50-day moving average, and ~7.5% above the 200-day moving average.

SPX Price & Volume Chart for the Week of Jan 07 2024

The uptrend from late October was broken at the end of the year; not surprising given the size and speed of the rally; ~8% gain per month is an impressive run, and also unsustainable, for an index of large cap equities.

The ADX directional indicators and price/volume are bullish, but weakened significantly over the holiday period.  The last post noted an extreme reading in the ADX and the corresponding potential for volatility and a downside potential.  The following week provided a massive reversal, along with several down days.

For price/volume, institutions were largely sellers after the start of the year, resulting in distributions days and closes in the lower half of the daily price range.  Leading stocks, as measured by the IBD 50 ($FFTY), also took it on the chin to start the year, dropping ~4%.

SPX Elliott Wave Analysis for the Week of Jan 07 2024

For Elliott Wave, both the RSI(5) and MACD showed bearish divergences towards the end of 2023, raising the probability of a decline in prices (which we saw last week).  The RSI(5) shows an oversold condition now, but the MACD remains bearish.

COMMENTARY
Last week’s job reports (JOLTs, ADP, NFP) were stronger than expected, which sent rate cut expectations lower, which sent interest rates higher, which sent most equities lower.  Be on the lookout for market reaction to CPI/PPI data this week (Thursday / Friday).

Going forward, the Elliott Wave analysis requires some fine tuning, as a bearish signal was in place most of the year, despite some rather large rallies.  It’s within EW rules to rally back to prior highs within a longer term “bear-market”, but I’d like to see if there’s a way to capture those moves.   Fortunately, the “majority rules” overcomes the short-comings of any single signal.

Best to Your Week and Your Year!

P.S. If you find this research helpful, please tell a friend.
If you don’t, tell an enemy.

Sources: Bloomberg, CNBC, Federal Reserve Bank of St. Louis, Hedgeye, Stockcharts.com, U.S. Bureau of Economic Analysis, U.S. Bureau of Labor Statistics

Invest Safely, LLC is an independent investment research and online financial media company.  Use of Invest Safely, LLC and any other products available through invest-safely.com is subject to our Terms of Service and Privacy Policy.

Not a recommendation to buy or sell any security.

Stock Market Outlook entering the Week of December 17th = Uptrend

• ADX Directional Indicators: Uptrend
• Price & Volume Signals: Uptrend
• Elliott Wave Analysis: Downtrend

ANALYSIS
The stock market outlook continues to show an uptrend in place, as we wind down 2023 and look forward to 2024.

The S&P500 ($SPX) gained 2.5% last week; that’s 7 positive weeks in a row. The index now sits ~6.5% above the 50-day moving average, and ~9% above the 200-day moving average.

SPX Price & Volume Chart for the Week of Dec 17 2023

The ADX directional indicators and price/volume are bullish (strong uptrend, backed by companies breaking out of good price patterns and limited institutional selling).

At 48 and change, the ADX reading is at it’s highest level since the August 2020 peak.  The indicator also breached 40 in July of this year.  In both cases, the SPX experienced volatile reversals, so eyes up.

For Elliott Wave, the SPX rallied past 4607, eliminating a few wave counts.  The index is now within 100 points (~2%) of the all time high, set back in January 2022.  Technical indicators remain overbought.  The RSI(5) divergence and MACD cross-over reversed, but the MACD histogram developed a negative divergence.

SPX Elliott Wave Analysis for the Week of Dec 17 2023

COMMENTARY
Inflation data, or lack there of, helped slingshot U.S. equities higher last week.

• CPI (November – Y/Y):
  • Headline: 3.1% vs. 3.2% (Oct)
  • Core: 4.0% vs, 4.0% (Oct)
• PPI (November – Y/Y):
  • Headline: 0.9% vs. 1.3% (Oct)
  • Core: 2.0% vs 2.4% (Oct)

Even the FOMC seemed to be impressed, deciding to maintain current interest rate policy while signaling 2-4 rate cuts next year via the infamous “dot plot”.  During the subsequent FOMC discussion, Powell struck a much more dovish tone than expected, noting the possibility of “easing” prior to actually seeing the 2% target manifest in lagging data. Just 2 weeks ago, Powell stated that it was premature to have such discussions.

Pundits and economists then went to work to justify the dovish view, dissecting the various data sets to show achievement of a 2% target, even if PCE isn’t there yet.  November PCE is scheduled to be released this Friday, December 22nd.

Market participants interpreted the above messaging to mean “soft landing achieved” and/or “recession averted”, and capital flows flooded into stocks.

This will be the final Stock Market Outlook of 2023, as the holiday season upon us.  Next Sunday is Christmas Eve (24th), and U.S. markets will be closed on Monday (25th) for the Christmas Holiday.  The following Sunday is New Year’s Eve (31st), and U.S. markets will be closed the next day (Monday, January 1st) for the New Year’s holiday.

Normally, I’d expect a light trading week from the 26th through the final trading day of the year on December 29th.  However, be on the lookout for tax-loss selling, given the massive run-up we’ve experienced since the end of October.

Best to Your Week!

P.S. If you find this research helpful, please tell a friend.
If you don’t, tell an enemy.

Sources: Bloomberg, CNBC, Federal Reserve Bank of St. Louis, Hedgeye, Stockcharts.com, U.S. Bureau of Economic Analysis, U.S. Bureau of Labor Statistics

Invest Safely, LLC is an independent investment research and online financial media company.  Use of Invest Safely, LLC and any other products available through invest-safely.com is subject to our Terms of Service and Privacy Policy.

Not a recommendation to buy or sell any security.

Stock Market Outlook entering the Week of December 10th = Uptrend

• ADX Directional Indicators: Uptrend
• Price & Volume Signals: Uptrend
• Elliott Wave Analysis: Downtrend

ANALYSIS
The stock market outlook continues to show an uptrend in place.

The S&P500 ($SPX) gained 0.2% last week. The index sits ~5% above the 50-day moving average, and ~7% above the 200-day moving average.

SPX Price & Volume Chart for the Week of Dec 10 2023

The ADX directional indicators and price/volume are bullish (strong uptrend, backed by companies breaking out of good price patterns and limited institutional selling).

For Elliott Wave, the SPX breached a key resistance level (4706) during Friday’s trading session, before closing lower.  4607 was the 100% retracement level for the July to October decline.  Closing above that level would eliminate the Intermediate 2 and Minute C waves from consideration.  Technical indicators show overbought conditions, with a negative divergence in the RSI(5) and a bearish cross-over in the MACD.

SPX Elliott Wave Analysis for the Week of Dec 10 2023

COMMENTARY
Last week’s U.S. employment data was a mixed bag:  JOLTs data showed fewer job openings than expected in October, while NFP showed a better than expected increase of ~200k jobs in November and a drop in unemployment to 3.7%.

There will be a lot of economic activity for markets and investors to digest this week, including:

• Monday: U.S. Treasury auctions (3M, 6M, 3Y, 10Y)
• Tuesday: November CPI & 30Y Bond Auction
• Wednesday: November PPI & FOMC Rate Decision
• Thursday: November Retail Sales
• Friday: Options Expiration (End of Quarter / “Quadruple Witching” Day)

Best to Your Week!

P.S. If you find this research helpful, please tell a friend.
If you don’t, tell an enemy.

Sources: Bloomberg, CNBC, Federal Reserve Bank of St. Louis, Hedgeye, Stockcharts.com, U.S. Bureau of Economic Analysis, U.S. Bureau of Labor Statistics

Invest Safely, LLC is an independent investment research and online financial media company.  Use of Invest Safely, LLC and any other products available through invest-safely.com is subject to our Terms of Service and Privacy Policy.

Not a recommendation to buy or sell any security.

Stock Market Outlook entering the Week of December 3rd = Uptrend

• ADX Directional Indicators: Uptrend
• Price & Volume Signals: Uptrend
• Elliott Wave Analysis: Downtrend

ANALYSIS
No change in the stock market outlook, as we begin December in an uptrend.

The S&P500 ($SPX) gained x% during last week, and sits just below a long-term trendline from the all time high on January 4th, 2022!  The index starts this week ~5.4% above the 50-day moving average, and ~7.2% above the 200-day moving average.

SPX Price & Volume Chart for the Week of Dec 03 2023

The ADX directional indicators and price/volume are bullish, while Elliott Wave analysis continues to wait for the current wave to end.  4607 is the key resistance level.

SPX Elliott Wave Analysis for the Week of Dec 03 2023

COMMENTARY
Revised GDP data shows the overall economy grew at a higher rate than first estimated.  Unfortunately, government spending continues to increase relative to consumer spending, which is not a sign of strong consumers.

PCE data shows inflation continuing to slow; which means pricing are still rising, just not as quickly verses last month or last year.  Slowing inflation is NOT the same as deflation, when prices are falling.

During his Friday speech, Fed Chair Powell said it’s premature to consider rate cuts, and that rate hikes are still a possibility.  The treasury market disagreed; interest rates headed lower, which means participants expect rate cuts sooner rather than later.  In fact, the Fed Futures market is pricing a ~60% probability of a rate for the March 20th FOMC meeting!

This week’s economic data centers on the jobs market, ahead of the next FOMC meeting on the 13th.

Best to Your Week!

P.S. If you find this research helpful, please tell a friend.
If you don’t, tell an enemy.

Sources: Bloomberg, CNBC, Federal Reserve Bank of St. Louis, Hedgeye, Stockcharts.com, U.S. Bureau of Economic Analysis, U.S. Bureau of Labor Statistics

Invest Safely, LLC is an independent investment research and online financial media company.  Use of Invest Safely, LLC and any other products available through invest-safely.com is subject to our Terms of Service and Privacy Policy.

Not a recommendation to buy or sell any security.

Stock Market Outlook entering the Week of November 26th = Uptrend

• ADX Directional Indicators: Uptrend
• Price & Volume Signals: Uptrend
• Elliott Wave Analysis: Downtrend

ANALYSIS
The stock market outlook exits the Thanksgiving holiday in an uptrend.

The S&P500 ($SPX) gained 1% during last week’s holiday shortened trading session. The index starts this week ~5% above the 50-day moving average, and ~6.5% above the 200-day moving average.

SPX Price & Volume Chart for the Week of Nov 26 2023

The ADX directional indicators and price/volume are bullish, while Elliott Wave analysis continues to wait for the current wave to end.  4607 is the key resistance level.

SPX Elliott Wave Analysis for the Week of Nov 26 2023

COMMENTARY
Last week’s bond auction went well, supporting equity markets rather than hindering their move higher.  FOMC meeting minutes were released on Tuesday, and were interpreted as dovish by most pundits.

This week, Q3 GDP data is released on Wednesday, PCE data on Thursday, followed by a speech from Fed Chair Powell on Friday.

Best to Your Week!

P.S. If you find this research helpful, please tell a friend.
If you don’t, tell an enemy.

Sources: Bloomberg, CNBC, Federal Reserve Bank of St. Louis, Hedgeye, Stockcharts.com, U.S. Bureau of Economic Analysis, U.S. Bureau of Labor Statistics

Invest Safely, LLC is an independent investment research and online financial media company.  Use of Invest Safely, LLC and any other products available through invest-safely.com is subject to our Terms of Service and Privacy Policy.

Not a recommendation to buy or sell any security.